Age Differences in Risk Tolerance and Economic Decisions

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AgeDifferences in Risk Tolerance and Economic Decisions

&ltBriefoutline of a paper&gt

Itis well-founded that economic behaviors vary with age, and findingsthat show an increased saving as people grow older attests to this.However, factors that influence the economic decision of older adultsare yet to be confirmed even though increased monthly claims, reducedrisk tolerance, and increased levels of wisdom have been suggested.The current study specifically aims at exploring whether riskattitudes that associate with age have a direct impact on theeconomic decisions.

Agedifferences in economic decisions will be explored regarding factorssuch as risks, change in responsibility, and differences in earnings.For example, Figure 1 shows a scenario where the old tend to save.Meanwhile, Figure 2 was used to discern the general trend in claimcost by age to indicate that such expenses increase steadily aspeople grow older

Nonetheless,the hypothesis that age associates with reduced risk-tolerance willbe evaluated as the effects of risk attitude on financial decisionsare yet to be discerned. Even so, Figure 3 indicates a scenariowhere age did not influence the level of nonsocial economic choices. Results of Ultimatum games in section A and B of Figure 2 indicate ascenario where older adults were prone to rejecting inequitablesharing of money in a financial social-bargaining game. They also hada higher (*p &lt .05 #p &lt .10) tendency to make an equitabledistribution of money in the social-giving game than youngerindividuals. Same findings show that older adults, were fairer butless greedy than younger ones (*p &lt .05).

Itis well-founded that economic behaviors vary with age, and findingsthat show an increased saving as people grow older attests to this.However, factors that influence the economic decision of older adultsare yet to be confirmed even though increased monthly claims, reducedrisk tolerance, and increased levels of wisdom have been suggested.The current study specifically aims at exploring whether riskattitudes that associate with age have a direct impact on theeconomic decisions.

Agedifferences in economic decisions will be explored in terms offactors such as risks, change in responsibility, and differences inearnings. For example, Figure 1 shows a scenario where the old tendto save1.Meanwhile, Figure 2 was used to discern the general trend in claimcost by age to indicate that the such expenses increase steadily aspeople grow older

Nonetheless,the hypothesis that age associates with reduced risk-tolerance willbe evaluated as the effects of risk attitude on financial decisionsare yet to be discerned2. Even so, Figure 3 indicates a scenario where age did not influencethe level of nonsocial economic choices. Results of Ultimatum gamesin section A and B of Figure 2 indicate a scenario where older adultswere prone to rejecting inequitable sharing of money in a financialsocial-bargaining game. They also had a higher (*p &lt .05 #p &lt.10) tendency to make equitable distribution of money insocial-giving game than younger individuals. Same findings show thatolder adults, were more fair but less greedy than younger ones (*p &lt.05).

Studyactivities will possibly include: testing other functional forms, and2. Evaluate other correlations that seem to relate to this study (Ifor example, presume that earnings increase with age)

Figure1: Household Consumption, Income, and Saving

Figure2: Age Difference in Monthly Claim Expenses

Figure3: Responses in Dictator and Ultimatus Games

1 People are more likely to save than invest, and the scenario seems to e identical for men and women.

2 Older people are less risk-tolerant than younger adults.